Recession, development and climate change: the big picture

December 28, 2008

     By Duncan Green     

This article of mine first appeared in the 25th October issue of the Scotsman.

If the 1930s are any guide, the seismic shock hitting the global economy has a long way to go. First came the plummeting stocks on Wall Street, then the social trauma of mass unemployment, soup kitchens and skid row. But they in turn triggered much deeper changes.

From the wreckage of the Depression emerged radical new approaches to running the world’s economies: Roosevelt’s New Deal, Keynesian beliefs in using government spending to manage slumps, and, in developing countries, a wholesale switch away from reliance on exporting raw materials such as coffee or copper to the pursuit of industrialisation.

A similar scale of tectonic shifts may be building below the surface of the current crisis. Some could resemble earlier transformations, others will have to break new ground – the world and its economy are now very different.

As in the previous crash, we are likely to see a retreat from the excesses and bubbles of laissez-faire capitalism as markets are re-regulated.

If (a big if) the worst of the financial upheaval is behind us, the shape and extent of re-regulation should become clearer at the emergency summit of the 20 leading nations in Washington DC on 15 November. This could mark the start of an overhaul of key institutions of the global economy such as the International Monetary Fund and the World Bank, which are proving increasingly unsuitable to the needs of the new century.

Even before the current crisis, the world was facing new challenges. Since the Second World War, massive economic growth based on fossil fuels has brought material benefits to millions. Now we are entering an age of scarcity – of water, fertile soil and, above all, carbon.

Whether through the onset of “peak oil” or the response to climate change, the rationing of carbon will transform the nature and language of politics. Avoiding catastrophic climate change while still allowing poor countries to grow their way out of poverty will require the United States and Canada to reduce their per capita emissions from 20 tonnes to roughly two (some argue it should be nearer one tonne). The average starting point for Germany and France is ten tonnes per head. China stands at three tonnes.

Much of the technology required is already there or nearly there. But the only precedent for this kind of rapid technological transformation is the wholesale shift of industrial plants to producing arms during wartime. And the difference in this case is that we cannot wait for external “shocks” to trigger action. By the time sufficient climate chaos strikes the main carbon emitters, forcing them to rework their economies, it will already be too late for much of the world’s tropical belt (where its poorest people live) and the polar ice caps.

Volatility is perhaps a less obvious threat than scarcity or climate change, but is emerging as an underlying theme in many of the problems the world is facing: from the rollercoaster of global markets to the increasingly erratic climate, which is making life a nightmare for many poor farmers, to the daily anxiety that is often the true face of poverty. For the one in four of the world’s population living on less than $400 a year, poverty is about a sense of vulnerability to whatever domestic disaster tomorrow may bring.

Whether through an accident at work, sickness, crime, drought or flood, the lives of poor people are characterised by the almost total absence of security and safety nets. Increasingly, the attention of governments and aid agencies is turning to ways of tackling such vulnerability by building nascent welfare systems in poor countries. This is echoed at a global level in the efforts to stabilise the wild gyrations of financial markets.

The 21st century holds a great global challenge: to complete the task of development and eradication of poverty while finding a new economic model that stays within the carrying capacity of the Earth and its atmosphere. Oxfam’s new book, From Poverty to Power, argues that this can be done, but only if we rethink our approach to development. Long-term progress requires a combination of two vital forces: active citizens and effective states.

In Bolivia, indigenous groups have made an extraordinary journey within the space of a generation, from slavery to land ownership and political representation. In India, mass movements have taken action to transform attitudes to violence against women. Around the world social change is starting in individual hearts and minds as poor people discover a sense of dignity and rights and start to demand change.

But that is not enough. Development requires effective states. The extraordinary transformation of countries such as South Korea, Vietnam and Botswana has invariably involved governments able to ensure their people are healthy and educated and that there are decent roads and power supplies, and which are willing to steer their economy through the dangerous, but ultimately rewarding rapids of globalisation.

Great change often seems implausible. Two hundred years ago, the abolition of slavery looked that way – slave-produced sugar provided the calories for Britain’s factory workers. A hundred years ago, the idea that women and poor men should have the vote was a pipe dream – in 1900 New Zealand was the only country in the world with universal suffrage.

The fight against poverty, inequality and the threat of environmental collapse will define the 21st century, as the fight against slavery and for universal suffrage defined earlier eras. It is hard to imagine a more worthwhile cause. Fail, and future generations will not forgive us. Succeed, and they will wonder how the world could have tolerated such needless injustice and suffering for so long.


December 28, 2008
Duncan Green